From the TUC

Social Partnership: the secret of VW’s success

11 Jan 2013, by in Economics

What are we to make of the continuing success of Volkswagen, which is embarking on a three-year, 50bn euro plan for new products, plant and equipment? I am prompted to ask this question by an article, ‘ Crisis has speeded VW’s domination of Europe’ (£), from Tony Barber, the Financial Times’ Europe Editor,  in that newspaper today.

I’m interested in this question, of course, because I visited Volkswagen’s Wolfsburg plant in 2011 as part of my research for the TUC’s ‘German Lessons’ report. At Volkswagen, I met with senior managers and representatives from the trade union, IG Metall, to find out more about the company and why it was so successful. When we launched ‘German Lessons’, IG Metall’s full-time officer at the Wolfsburg plant, Frederic Spiedel, came to the UK and spoke at a meeting of MPs, alongside Labour’s Chuka Umunna, where this question was also explored.

I agree with much of Tony Barber’s analysis in today’s FT. We could, argues Barber, conclude that VW is “crushing the competition fair and square with superior production techniques, manufacturing operations that span the globe and unmatchable prices”. On the other hand, we could condemn the company for being “irresponsible and predatory”.  A third option would be to recognise the contribution made by the broader political and macroeconomic conditions in Europe. Barber is, he says, referring here to the launch of the euro, which prevented VW’s rivals from benefiting from the appreciation of the Deutschmark, Germany’s labour market reforms in the early 2000s, and the neverending debt crisis.

Of course, in Volkswagen, like in any other company, there is no single reason for success. But it would be great if the trade union contribution could be recognised too.

Volkswagen is subject to German labour laws which give works council members – who are usually, in practice, trade unionists – seats on supervisory boards. Plans for future company strategy are shared with works council representatives, whose support is needed to move forward. Ultimately, if the works council won’t support a decision, management can implement it, but that doesn’t happen in practice. Failure to agree a way forward would be considered a failure. Unions approach this way of working, called co-determination, in a positive spirit. Martin Rosik, VW’s Human Resources Manager, told us: “There is a big common sense that competitiveness and labour welfare are directly linked to each other”, before adding, “Labour representatives expect the company to be competitive, they force the company to be competitive, and take care of the interests of their members. Here you don’t have the classic understanding of what is whose role in this game.”

Yesterday, the TUC hosted a seminar on industrial policy, ‘Building a Secure Future’, as part of our After Austerity series.  Lords Michael Heseltine and Andrew Adonis were joined by an industrialist, Andrew Churchill, and the TUC’s Frances O’Grady, with the FT’s Peggy Hollinger in the chair. At this event, my good friend Tony Burke, Unite’s Assistant General Secretary for manufacturing, commended ‘German Lessons’ and asked Andrew Adonis to consider it as Labour thinks about its future industrial policy. More widely, the Government searches, increasingly desperately, for that elusive economic growth and the Labour Leader, Ed Miliband, seeks to explore what a fairer model of capitalism might look like.

We live in interesting times. A modern industrial strategy and a fairer capitalism are both ideas whose time has come. And both require a strong voice for working people if they are to reach their full potential.  Germany calls it the Social Market Economy. It is Volkswagen’s not-so-secret weapon. If we are serious about future industrial success, we ignore it at our peril.